Reporters are conflicted
about inflation. On the one hand, they worry when indicators point
to the possibility of future inflation. But on the other hand, when
inflation is low, they are alarmed that retirees will be hurt by
relatively small cost of living adjustments (COLAs) in Social
It doesnít seem to occur to
them that if inflation is low, then the actual cost of living isnít
increasing substantially, so small "cost of living" increases are in
Media Research Center
analysts reviewed stories since October, 1996 dealing with COLAs and
inflation. They found a common theme: Small COLAs are universally
reported as being bad news, even though a small COLA by definition
means that inflation is low.
COLAs were in the news in
December of 1996 when a congressionally appointed panel concluded
that the Consumer Price Index (CPI) overstated inflation by about
one percentage point per year. Since this means that the the actual
cost of living hadnít gone up as much as the government had thought,
retireesí COLAs had been too large for years.
Whom did the networks see
as the victims in this situation? Workers, who had long paid too
much in payroll taxes to support the artificially large COLAs? No,
the networks focused on the "loss" to seniors.
"We begin tonight with
money," said ABCís Peter Jennings on the December 5, 1996 World
News Tonight. "Maybe a little less for you, depending on who you
are, and certainly a little more for Uncle Sam."
According to reporter Lisa
Stark, in the story which followed, "One third of the federal budget
is tied to the CPI, so cutting the official inflation measurement
1.1 percent would lower all government payments based on cost of
living, saving the government a trillion dollars over the next
twelve years." But, "cutting those payments would affect 60 million
Americans, including seniors who stand to lose an average of $100 a
year in Social Security."
Dan Rather, on December 5ís
CBS Evening News, had a similar take on the proposal: "A plan
officially proposed in Washington today could affect the incomes of
millions of Americans, especially those older or at the lower end of
the economic scale."
Reporter Ray Brady then
told viewers that the average Social Security check "will rise from
$724 to $745 a month in January, but it will rise to just $737, a
difference of eight dollars, if the congressional commission has its
He also ran a soundbite
from a Social Security recipient at a seniorsí center, who said:
"For many people who come here, eight dollars a month is a big loss.
That may be the only eight dollars they have to go to the movies."
This is an interesting
definition of "lose." Seniors would no longer receive COLAs in
excess of increases in the actual cost of living, therefore they
would "lose" money. The same logic guided network reporting on COLAs
this month, as the federal government came out with next yearís COLA
for Social Security.
ABCís Lisa McRee, sitting
in for Jennings on the October 16 World News Tonight,
reported what she called "some bad news for those already retired.
The government says next yearís cost of living increase for Social
Security checks will be just 2.1 percent. Now thatís the smallest
rise in a decade because of the low rate of inflation."
According to NBCís Tom
Brokaw, on the October 16 Nightly News, it was "jarring news
for senior citizens" that "their cost of living increases will
amount to peanuts this year, just 2.1 percent; thatís the lowest in
And Eric Engberg, on the
same nightís CBS Evening News, called the increase "the
smallest in a decade" and "unwelcome news for many of the 44 million
people who receive benefits." He argued that "the small size of the
benefits increase may crimp people living on Social Security."
None sought to explain how
a larger increase tied to a higher rate of inflation (i.e., a higher
cost of living) would have been any different for retirees. If the
cost of living adjustment is tied to the cost of living, then
retireesí standards of living shouldnít change regardless of the
size of the COLA. (Engberg, at least, pointed out that the small
COLA is "also a sign of reduced inflation, which is good news for
the overall economy.")
Itís not that reporters
like inflation. As MediaNomics reported in April, the
networks (incorrectly) saw an ominous threat of inflation in reports
of strong economic growth and low unemployment.
"Itís been two years now
since the Federal Reserve raised short- term interest rates in this
country," worried Brokaw on the March 25 Nightly News. "The
stock market has been booming; well, maybe booming a little too
ABC was so concerned about
inflation that it devoted two long stories on that eveningís
World News Tonight to the threat of price hikes. Peter Jennings
reported that "the chairman of the Federal Reserve Board made good
on his threat to raise interest rates if, in his view, the economy
was in danger of overheating."
ABC correspondent Aaron
Brown then argued that "consumer spending has been strong for two
straight quarters; that sort of increased demand can lead to higher
prices. Businesses need more workers to meet that demand and may
have to pay higher wages to get them. Unchecked, thatís a
prescription for inflation."
In the next story,
correspondent Robert Krulwich further outlined the theory that
unemployment emboldens workers to demand higher wages, which leads
to higher prices. "Tradition says if Iím the boss of a company and
my workers come to me and say, ĎBoss, we want a raise,í if I know
that there are thousands of people out of work in my town looking
for jobs, Iím likely to turn to my employees and say, ĎGet lost,í
because I can replace them.
"But right now, the
situation is quite different," Krulwich argued. "People are saying
jobs are in general easier to get nowadays than anytime since 1992.
So now if they say, ĎBoss, give us a raise,í Iíve got to be more
careful because some of them can leave me now and it will be harder
for me to replace them, so I might just give them that raise."
According to Krulwich, price hikes would naturally follow if there
wasnít a corresponding productivity increase.
This is the controversial
Phillips Curve, which posits that economic growth and wage growth ó
not excessive money growth ó ignite inflation. Reporters assume the
Phillips Curve is accurate, in spite of increasing evidence that it
isnít, and that inflation is a monetary phenomenon. But, still, this
assumption shows a concern in the media about the effects of high
So in other words, the
economy simply cannot win. When inflation is high (or looks like it
might increase), itís reported as bad news, that the economy may be
"booming a little too much." When inflation is low, and cost of
living adjustments are, naturally, smaller, itís reported as bad
news, even "jarring news" that threatens to "crimp" senior citizens
reliant on Social Security.
Reporters cannot have it
both ways. Either inflation is bad or it isnít.